Digital Economy Dispatch #055 -- Is Your Digital Transformation Change Ready?

Digital Economy Dispatch #05526th September 2021

Is Your Digital Transformation Change Ready?

There is no doubt that central to digital transformation is a recognition that it is a “journey” rather than a “destination”. That is, rather than a single well-defined shift to a pre-determined way of working, digital transformation is seen as a direction of movement in response to emerging needs where constant adjustments are made to be able to take advantage of digital capabilities to optimize the value delivered to all stakeholders.

As with any such journey, it requires significant investment in managing the steps along the way. Especially in complex situation with many unknowns, a well-defined strategy that can adapt to the terrain is essential. Starting with a realistic description of the landscape, organizations must establish their current position and intended direction of travel, before defining milestones along the way to ensure they make steady progress.

As a result, a necessary foundation for many organizations undergoing digital transformation is a disciplined change management approach. Such a framework brings a structured improvement scheme that can is used to point the way forward and keep organizations on track.

All Management is Change Management

Inevitably, much of the focus in any organization is change management. Indeed, it can be argued that the heart of all management tasks is the need to define and enact changes within the organization. Even so, traditional change management often considers change as being detached from “normal” management responsibilities, treating it as a separate process handed off to other teams responsible for taking the organization from one stable state to another. In contrast, in digital transformation where change is constant, it must be considered the essence of management, with implications on all the organization’s activities.

Consequently, how change is managed across the organizing becomes a critical aspect in the success of any digital transformation. It requires careful attention to ensure the updates in technologies and working practices are meaningful and sustained. What can we learn from traditional approach to change management? Where do they fall short when an organization is involved in a digital transformation?

As organizations adopt digital technologies to improve their operating processes, they also look to make more fundamental changes across their business practices. Surrounded by the instability and uncertainty prevalent in many sectors in the digital economy, organizations are forced to accept that an ability to recognize and manage change is essential. By encouraging a more disciplined approach to digital transformation, they seek longer-term systemic change aimed at revolutionizing the organization’s structure, strategy, and execution.

When Agile is Fragile

In many situations, despite their aspirations to adopt digital technologies and adjust working practices to improve responsiveness and deliver greater value, organizations struggle to go from early “quick wins” to more substantial sustained improvement across their teams. They adopt many different strategies to optimize for success. Yet, scaling and sustaining change across the organization can remain elusive.

They know that delivering change across the organization is critical for the success of its digital transformation. However, lessons from the agile software delivery domain have taught us that often leaders in the organization become overly obsessed with the new capabilities presented by digital technology, or are carried away by the excitement of new practices in use by a few high performing teams. To achieve sustained success, organizations need to have a disciplined approach to change, supported by innovation management practices that yield results, and grounded in techniques that address the most common failure points. Speed and flexibility without appropriate discipline leads to chaos.

The experiences from many projects highlight that defining and executing a digital transformation strategy is neither straightforward nor without risk. Hence, success in digital transformation requires discipline in management aligned to the characteristics of the organization and its culture. Focused on technological shifts, on-going digitization efforts have yielded useful results, but they have had limited impact without significant attempts to manage the disruption they create to existing ways of working.

Toward a New Approach to Change Management

Yet, the data from recent reviews indicates that many digital transformation programmes are not on track. The fast pace of evolution in the digital world is taking its toll and forcing a review of change management practice. Organizations are having to react more quickly than ever before to the different drivers that challenge the way they define their structure, make decisions, and manage the way they operate.

Through experiences working with several organizations undergoing the trauma of digital transformation, I have found that the most successful ones demonstrate three clear traits:

• They encourage an innovation-focused mindset.

• They actively explore digital business model alternatives.

• They assist the organization and its people to become more adept at change.

These traits bring to the organization the agility and flexibility necessary to embrace digital transformation. They surround the deployment of digital technology with the management structures and discipline essential to success in their use.

In many cases, the starting point for accelerating change is to understand the organization’s culture. In broad terms, an organization’s culture consists of the patterns of behaving, feeling, thinking, and believing that pervade the organization’s activities and actions. From both practical and academic perspectives, issues of culture have long been an area of concern, particularly when undergoing change. Becoming comfortable with constant change means that an organization must have a strong understanding of where and how those changes impact its culture.

Many studies from eminent management scholars such as Peter Drucker, Gary Hamel, and John Kotter have highlighted the importance of culture in accelerating or dampening change activities. The overwhelming evidence from their work, supported by a variety of practical studies, is that an organization’s culture plays a key role in change activities from two perspectives: alignment of culture to the organization’s overall strategy, and the extent to which the culture supports and encourages change. Misalignment in either of these raises significant challenges to initiating change if it is perceived as increasing operational risk, and to motivating employees to support change when it involves personal risk.

Accelerating Change

For more than 30 years, John Kotter has been a key voice in the world of organizational change. The views expressed by Kotter come from his experiences working with many kinds of organizations over a long time and his study of change management theories. He has studied the way that organizations manage change and adapt to the needs of their clients and stakeholders. His well-known “8 step model” created in the 1990’s offers a very linear view of change as a series of steps that an organization follows to go from one stable state to another.

Recently, Kotter’s perspective has shifted to see organizations as always in flux. In this new perspective, organizations must accept that change is a constant and respond with techniques to manage change that are both continuous and emergent. Kotter’s latest thinking on how organizations manage change in a digital world emphasize the need for a move from rigid organizational structures aimed at maintaining stability to more dynamic networks of teams that can respond quickly to changes in their operating environment.

In this new approach, the traditional organizations structures that were designed to “run the business” in a stable environment must be augmented with a more agile set of teams governed by rapid decision making processes that encourage creative problem solving. Drawn from all corners of the organization, this my dynamic structure creates the responsive layer that plays a dual role. On the one hand it acts as the first responder to emergent opportunities that can drive growth, while on the other it insulates the core of the organization from the chaos and instability that often surround these kinds of disruptions. A dual operating system that he believes is sufficiently adaptable to deal with volatility that comes with digital transformation.

Plus ça change, plus c’est la même chose

In digital transformation, the only constant is change. Consequently, managing change across the organization is essential to ensure that digital transformation is effective and sustained. Traditional approaches to change management can be helpful to understand these concerns, particularly with respect to the role played by the organization’s culture. However, in a digital world, managing change requires new approaches optimized for handling the unpredictability and volatility that comes with working at speed in the context of significant digital disruption. How this change is supported may well determine the success of your digital transformation journey.

Digital Economy Tidbits

10 things your corporate culture needs to get right. Link.

Well, this is quite a list. In these challenging times, it is interesting to get a view of what matters to employees and gain a sense of where to focus effort in digital transformation as it affects individuals. Perhaps no surprises or major insights in this list. But it made me think.

Knowing what elements of culture matter most to employees can help leaders foster engagement as they transition to a new reality that will include more remote and hybrid work.

The effect of remote work on collaboration among information workers. Link.

A very interesting paper from Nature analyzing the data on worker collaboration through lockdown and the impacts of remote working. The conclusions are what you’d expect. But the data analysis gives some evidence in support that is worth a look.

Our results show that firm-wide remote work caused the collaboration network of workers to become more static and siloed, with fewer bridges between disparate parts. Furthermore, there was a decrease in synchronous communication and an increase in asynchronous communication. Together, these effects may make it harder for employees to acquire and share new information across the network.